How to calculate and pay advance tax for corporates

Advance tax, also known as pay-as-you-earn, is the income tax that needs to be paid in advance as per income tax provisions. Section 208 and section 209 of the Income Tax Act covers provisions relating to advance tax and its computation thereof.

In the present article, let us briefly understand the basics of advance tax for corporates; instalments of advance tax for corporates; steps for online payment of advance tax for corporates and consequences for non-payment or delayed payment of advance tax by corporates.

Basics of advance tax for corporates –

Advance tax is payable by corporates whose estimated tax liability for the respective Financial Year is INR 10,000 or more.

Notably, as per rule 125 of the Income Tax Rules, a corporate taxpayer is mandatorily required to discharge its tax liability, which can also include advance tax, via electronic payment mode only.

As seen above, advance tax is payable on estimated tax liability. Accordingly, following steps can be followed for computation of advance tax:–

STEP 1 – Estimate total income of the corporate for the Financial Year under all the heads of income;

STEP 2 – Estimate all the tax credits, exemptions, rebates and deduction as available to the corporate;

STEP 3 – Compute total taxable income by deducting STEP 2 amount from STEP 1 amount;

STEP 4 – Calculate estimated tax liability by applying applicable income tax rate. Also, give effect to Tax Deduction at Source i.e. TDS.

Notably, advance tax will be payable on the amount derived at STEP 4.

Instalments of advance tax for corporates –

Corporates are required to discharge their advance tax in four instalments. The following table briefly explains the same –

Some important points –

> Any payment of tax till 31^st March will be considered as advance tax;

> In case last payment date of any instalment is a bank holiday, then immediately next working day will be considered as last day for payment of respective instalment.

Steps for online payment of advance tax for corporates –

In order to make online payment of advance tax, the corporates will have to follow below mentioned steps –

STEP 1 – Visit https://www.incometax.gov.in/iec/foportal/;

STEP 2 – Select ‘e-Pay Tax’ under Quick Links;

STEP 3 – Enter PAN of company and re-enter PAN to confirm it. Enter mobile number and click Continue;

STEP 4 – Enter OTP received on the mobile number entered at STEP 3 above;

STEP 5 – Select ‘Income Tax’ and click ‘Proceed’;

STEP 6 – Enter all the tax details i.e. amount paid towards tax, surcharge, cess, interest, penalty and others and click ‘Continue’;

STEP 7 – Select the Payment Mode and Bank and click Continue;

STEP 8 – Preview of the challan will be displayed, verify the details and click ‘Pay Now’.

Consequences of non-payment or delay in payment of advance tax by corporates –

In case the corporate fails to make the advance tax payment or makes delayed payment of advance tax, interest will be levied under section 234B and 234C of the Income Tax Act. Levy of both the interest is explained hereunder –

• Interest under section 234B of the Income Tax Act levied for non-payment of advance tax –

Here, interest @1% per month will be leviable in case at least 90% of the advance tax is not paid by 31^st March.

• Interest under section 234C of the Income Tax Act levied for delayed payment of advance tax –

Here, interest @1% per month will be leviable in the following manner –